Playing the franchising game: how to get the best of franchise opportunities

While the downturn has been hitting the retail sector hard, the gaming industry - in particular the second hand and pre-played games - continues to grow really fast, being one of the few niches doing well as families move toward "co-operative gaming", a form of hobby that involves more than one single member.

According to the sales figures from the Interactive Entertainment Association of Australia, the gaming industry revenue increased 47% during the 2008 calendar year, reaching $1.96 billion. Definitely not too bad in a time of economic turmoil.

At Gametraders we are very proud to be able to say that we are Australian owned, and have established ourselves as one of the leading companies in the sector thanks to our ability to cater to the full range of computer game formats developed since the 1970s. Logically, such a rapidly growing franchise business is attracting much interest from potential franchisees. However, despite the ever present, and of late increased, need for revenue, particularly the enticing upfront franchise fees, we turn away many candidates because we always strive to get the perfect fit from our franchisees in terms of company culture and values.

Which are then the key factors that determine who is going to be a successful franchisee? What does it take to keep up with the australian franchise fast-growing industry that offers plenty of business opportunities?

1. Personal attributes to thrive in the franchise business

First off, a successful franchisee is a highly motivated and innovative individual, prepared to work very hard, who does not set limits on what can be achieved. Also, face to face communication skills are crucial, as the enjoyment of dealing with people on a daily basis is an integral part of the job.

The franchise business requires motivated franchisees with a passion for customer service. We take franchisees' feedback on board and continuously strive to improve our systems to help our franchisees achieve their business goals.

No less important is the need for every person eager to embark on the franchise business to do their math accurately, ensuring they have sufficient working capital to take full advantage of all the potential franchise opportunities. We recommend that franchisees calculate the working capital requirements (which should be done by an accountant) and factor in a reasonable wage for themselves and any staff so that they are not solely reliant on profit to earn a living in the first 12 months.

For this reason it is necessary to draw up an annual business plan incorporating cashflow budgets which are constantly monitored to compare the budget to the actual expenditure.

Lastly, a potential franchisee must not purchase a business just for a job or for the lifestyle that "seems" attached to it, but realise that to be a successful franchisee they must have a very big vision with an equally as large determination and commitment to doing whatever is necessary to becoming a success.

2. Business model: strong and simple

The simpler, the better: that' s how a successful business model should be. It all comes down to being replicable and clearly recorded. The franchise business model at Gametraders is simple and totally unique. Gametraders staff must follow our procedures when a new customer walks into the store: from how you address them, how you approach them, what you say, how you close the sale, even right through to how you say goodbye and how you answer the phone. First impression and good quality customer service are critical to success.

Gametraders support head office provide the franchisees with the business model, operations manual, national marketing protocol and POS system. They will assist the franchisees in every way possible but they cannot guarantee the success: this will be based on the franchisee efforts. The fracnhise business model has been studied in every single detail and has to be followed religiously as even relatively small matters can have a profoundly negative effect. We also provide a daily morning email communication to keep our franchisees up to date on all important information on in house operations as well as the rapidly evolving game trading industry.

3. The franchisor role: a positive guidance

We described the attributes we seek from our franchisees, and realise that the qualities of the franchisor play an equally relevant part in determining the outcome of the franchisee business. The franchisor role is quite complex and it is anything but sitting back and waiting for the returns.

Being a part of a consolidated franchise system can offer the opportunity to achieve fast market awareness and recognition with minimal capital. As a business owner interested in becoming a franchisee, it is important that you do the necessary research to understand whether a particular franchise system will really match your expectations and your needs for growth. Don't forget that a good franchise model should be simple enough to be replicated, communicated and understood by everyone within the business.

Firstly, franchisees must perceive their franchisor and support staff as transparent and trustworthy people. Selling is not about convincing a person to buy something, but getting people to trust in you as a person. And we - as franchisors - have to be well aware of the substantial commitment by franchisees of approximately $400,000.

This is why we would rather not grant a license if we think that there is any risk that person would not suitable. A good franchise business should be fairly strict about who is let in, and taking only those who satisfy the evaluations standards. Potential franchisees are ready to put everything at risk to enter a franchise system, therefore a franchisor must handle this very carefully and have empathy for the welfare of the franchisee as well.

A last word

Our last piece of advice to potential franchisees is to gear your expectations towards a realistic scenario. The first twelve months is always the most difficult period when building up a business, therefore you have to manage your expectations and do your research thoroughly. It will surely take a good deal of work, but if you’re really committed and prepared to work hard then your qualities, added to a simple and effective business model and a transparency in the role of your franchisor will create the proper blend to thrive in this fast growing industry.